In an effort to attract more assets, kaChing, an online provider that connects investment managers with investors, launched a platform for small and mid-sized registered investment advisors.
The new platform, kaChing Pro, allows professionals managing less than $500 million in assets to take on new clients and grow assets under management. More than 25 investment managers have already signed on to the platform, which launched last week.
Dan Carroll, kaChing’s founder, said his company hopes to add more top-quality investment managers. At the same time, kaChing is intent on significantly increasing its own asset base by attracting small and mid-sized RIA firms, according to Andy Rachleff, the company’s chief executive officer.
Small to mid-size investment managers have traditionally struggled to increase their assets under management due to difficulties in differentiating their services, prohibitive costs of taking on smaller accounts, and no effective means of distribution to reach new clients.
However, by using kaChing’s platform, advisors will be able to simplify their back office operations and focus on wealth management, Rachleff said.
Since it launched in October, kaChing has accumulated $8 million in assets under management. But, Rachleff said he hopes to have $200 million by the end of the year. “We think that managers will bring assets with them,” he said.
“To provide the best experience,” Rachleff said, “we need to attract as many investment managers as possible. The more investment managers, the more investors that are using our platform.”
Carroll said the platform would also help RIAs market themselves to smaller investors. He called kaChing Pro an “Amazon-style self-service storefront” for advisors looking to attract mass-affluent clients. “In an [separately managed account] world, a lot of investment managers have high investment minimums and a lot of mangers are turning money away because investors don’t meet minimums,” he said. “Now they can turn those investors over to kaChing where they can make the same investments, but on a different platform.”
“Advisors never have to turn away money again,” Carroll said. The firm requires a $3,000 minimum investment. A traditional separately managed account could have a minimum investment as high as $200,000.
Analysts said many investors are disenchanted with mutual funds and are turning to companies like kaChing. The company’s biggest competitor in this space, Covestor Investment Management, a New York and London company, is also attracting assets by targeting mass-affluent investors. Covestor has a minimum investment of $10,000 and Perry Blacher, Covestor's chief executive, said the company has seen a surge in large portfolio managers joining his platform.
In March, Covestor announced that five investment management firms have signed on to allow its clients to mirror the company’s portfolios. This added 12 new portfolios to give Covestor a total of 24 professional money manager models and 34 models from non-professionals on its platform. Covestor expects to have 100 models by the end of this month and 300 to 400 models by July.
Blacher said the level of interest has surprised him lately. He said many portfolio managers are tired of working with wirehouse firms because they are often “squeezed hard on fees” in order to sell through that channel. With a firm like Covestor or kaChing, advisors have an opportunity to develop direct retail distribution, Blacher said.
Carroll acknowledged that Covestor is a competitor, but noted that it doesn’t have the equivalent of kaChing Pro. “There are two significant different between kaChing and Covestor,” Carroll pointed out. “All of our managers have to be professional and that is not the case on Covestor. We carefully screen the managers on our site and only a small percentage qualifies. [Covestor doesn’t] have that either.”
But, that doesn’t bother Blacher. Covestor started as a company with “investors talking to investors,” and has no plans to move to kaChing’s “professional-only” model,” Blacher said. “Part of the power of the Internet is that individual investors have the same access to tools and research,” he added. “Investors should be able to follow both other investors and professional money managers. We want to offer the tools to empower clients to find out what works best for them.”
Platforms offered by companies like Covestor and kaChing are not for every investor. Analyst Burton Greenwald of BJ Greenwald Associates in Philadelphia said they require more of a "do-it-yourself approach at a time when investors are begging to have their hands held." Greenwald said it could be difficult for these companies to attract significant assets but that he would not be surprised to see them bring in $3 billion collectively in the next three to five years.
